Showdown over healthcare reform

A risky political gambit could cost Obama and the Democrats in Congressional elections.

Republican officials, including Mitch McConnell, centre, say Obama's healthcare reform plan is "clinging" to a measure which the American people have rejected time and again [EPA]

A few weeks ago, you could almost hear it echoing through the halls of the White House: "We were this close."

Barack Obama, the US president, has for years talked about the need for health insurance reform. He campaigned on the issue and spent his first year in office focusing on what is his top domestic priority.

The House and the Senate were both able to pass health insurance reform bills in the past, but as the two chambers were reconciling their differences, a giant roadblock emerged from something unexpected in Massachusetts.

A Republican was elected to fill the seat left open by the death of Senator Ted Kennedy, putting in question whether Obama had the necessary votes to get the health bill passed. It may seem strange that one vote could derail such a major initiative long championed by the president, but that is the system in Washington.

In order to stop delay tactics by the minority party - the Republicans - in the Senate, Democrats would need all their members and the two Independents to vote in favour of this massive bill.

No retreat, no surrender?

Obama's plan will insure 31 million people; the Republican plan focuses on three million [EPA]

The Obama administration was left with a conundrum: Should they continue to push this issue which had dominated their first year, or simply let it go and hope the voters understand come election time?

Obama decided, in the words of Republicans, to "double down." He is now investing all of his political capital into the healthcare issue in a last-ditch effort to get some semblance of health reform passed into law.

His aides have arranged a very unique way of trying to re-launch the issue - a showdown.

The president invited Democrats and Republicans to his guest house on February 25 for a six-hour debate on the issue that will be broadcast live in its entirety. Some Republican leaders have called it a set-up, claiming it will only be political theatre, but it should make for interesting TV - and that is exactly what the Obama administration is hoping for.

Rising costs

According to the US Census Bureau, 46 million Americans do not have health insurance. That means when they get sick, their bills can total in the tens of thousands of dollars – an amount that most Americans just cannot afford. Some simply cannot pay and the cost is passed on to everyone else.

For those who have insurance, premiums are rising much faster than the cost of living. A California insurance company recently moved to raise premiums for 800,000 customers by 39 per cent. That translates into thousands of dollars for every family involved – it also translates into billions of dollars for insurance companies.

According to the White House, that insurance company made a profit of $2.7bn dollars in the fourth quarter of 2009. But health insurance companies say they are not the ones making the profits.

Karen Ignagni of America's Health Insurance Plans said: "Health plan profits are less than one cent, one cent of every dollar."

Insurance companies say the government should really be looking at what doctors and hospitals charge. Nevertheless, Obama believes the biggest problem lies with insurance companies and has chosen to focus on that industry first. Ironically, even though this issue is commonly referred to as Health Care Reform in the US, it is more accurate to call it Health Insurance Reform.

Economic woes

The White House says economic recovery is impeded by high healthcare costs [EPA]

Obama says the high costs of insurance and the rising number of insured also negatively impact the economy; the vast majority of Americans get their insurance through their employers who pay a large percentage of the cost of coverage.

The White House argues that this is cutting into profits and keeping companies from hiring – something which is impeding the country's recovery from recession.

With so much at stake, the president earlier this week took a measure he had been unwilling to approach in the past. He has put forward his own healthcare reform proposal, merging the Senate and House bills, and putting his name and the power of the executive office behind it.

But this measure was met with criticism that Obama should have taken such actions sooner.

Instead, he chose to lay out principles and let Congress sort out the details. In Washington, that is called watching the sausage being made and it is never pretty to watch the process play out. As the healthcare debate raged on in Washington, pundits argued that the Democrats had lost control of the message and the support of the American people.

According to a recent Newsweek poll, 49 per cent of Americans were opposed to the president's new plan, but when told what it included, 48 per cent approved of the ideas. It is numbers like this that likely led to the idea of the televised showdown, offering the administration a chance to educate the viewers - and possibly win their approval.

That will be crucial for Obama if he wants to maintain the support of his own party, who are unlikely to vote for a hugely unpopular measure as they head into a tough election later this year.

The Obama plan

Republicans are expected to present their own plan, but the two parties could not have a more different vision of the solution. The 'Obama Plan' calls for insuring 31 million Americans, whereas the Republican proposal would insure just three million.

The latter believe the answer lies in increasing competition and allowing states to come up with innovative programs to expand insurance and reduce premiums.

Obama's plan is far more complex and expensive. First, it calls for a crackdown on insurance companies; he wants federal authorities to have the power, now reserved for some states, to decide what insurance companies can charge. He would also limit what insurance companies can do.

They would no longer be allowed to deny people coverage for pre-existing conditions or set caps on the amount of money they have to pay out for a specified period of time. The president wants the American people to take some responsibility on this issue, (all but the very poor would be required to get health insurance) or pay a fine.

Employers would only have to pay the government part of the cost if employees are receiving government help to buy insurance. The Obama plan calls on the government to help lower and middle class families pay their premiums with tax cuts and subsidies.

The cost according to White House officials is $950bn dollars over 10 years.

New taxes?

Analysts warn that Obama and the Democrats could lose in the next elections [AFP]

The president insists that the bill would not increase the deficit - the government would bring in new money from increased taxes for wealthier Americans and a fee for those with the most expensive health insurance policies.

Insurance firms, pharmaceutical companies, and the manufacturers of medical equipment would also pay billions in additional fees.

Mitch McConnell, the Senate Republican leader, described this approach as "clinging to a massive bill that Americans have overwhelmingly rejected again and again for months".

Such statements have left little room to speculate that the two sides, so far apart, will be able to compromise. Analysts believe that Obama's ultimate goal will not be to get Republicans on board, but to keep fellow Democrats in his corner.

Bill Galston, of the Washington-based think tank the Brookings Institution, says the president's pitch will be simple: the cost of doing nothing will be far greater than the cost of passing reform.

If the bill does not pass, however, there is concern that the American people will view Democrats as unable to lead – sentiments that could punish them in the November Congressional elections.

Troublesome reconciliation

The Democratic vote becomes pivotal for Obama if the White House makes good on its earlier signals that it may try to push the bill through without Republican support.

It could only do that with a rarely used parliamentary procedure called "reconciliation", which allows a bill that deals with the budget or the deficit to pass with a simple majority in the Senate.

Parliamentarians have argued against this saying it is a stretch of the imagination to classify the wide array of health insurance reforms within the legislation as budgetary.

The administration is expected to argue that with so much of the deficit caused by healthcare, it is a reasonable measure to bring the costs down.

If the Senate Parliamentarian rules against using reconciliation, the vice-president can overrule him and make the final decision. Those opposed to the legislation say such a move would infuriate the American people and cost the Democrats dearly in the next elections.

"If they [Democrats] try to pass an unpopular bill through a process it's not designed for, and break the rules to do it, I think there would be a huge backlash not only this summer at more town hall meetings, but then next fall at the polls as well," says Grace-Marie Turner, the president of the Galen Institute, a research organisation which studies healthcare reform and tax policy.

"I think they would just throw the bums out."

With so much of Obama's credibility and political capital invested in health insurance reform, his administration might decide it is worth the risk.

How much of a risk will be clear on February 25, when he faces off with Republicans in this battle to win the approval of the American people on an issue that affects every one of them.

Related

Us president outlines a healthcare plan for discussion with congressional leaders.

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